Oil climbs, but record US crude output and higher OPEC supplies drag

CNBC

  • Oil prices edged higher on Tuesday but growing U.S. production and expectations of higher OPEC supplies weigh on sentiment.

An oil pumpjack operates near Williston, North Dakota.

Andrew Cullen | Reuters
An oil pumpjack operates near Williston, North Dakota.

Oil prices edged higher on Tuesday after falling nearly 2 percent in the previous session, but growing U.S. production and expectations of higher OPEC supplies continue to weigh on sentiment.

Brent crude futures added 15 cents, or 0.2 percent, to $75.44 a barrel at 0020 GMT, after settling down 2 percent at $75.29 a barrel on Monday.

U.S. West Texas Intermediate (WTI) crude was up 28 cents, or 0.4 percent, at $65.03 a barrel. It finished the previous session 1.6 percent lower at $64.75 a barrel.

“It’s all about supply, whether it’s OPEC raising output or U.S. increasing production, all roads lead to higher global oil supplies, which is leaving oil traders shaking in their boots,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA in Singapore.

The Organization of the Petroleum Exporting Countries (OPEC) is due to meet in Vienna on June 22 to decide whether the group and non-OPEC members including Russia will raise production to ease concerns over potential supply shortfalls from Iran and Venezuela.

Over the weekend, OPEC and non-OPEC Arab oil ministers agreed on the need for continued cooperation to balance global supply, Kuwait’s state news agency KUNA reported.

Seeing 'cracks' in oil demand, says pro

Seeing ‘cracks’ in oil demand, says pro  

Increasing U.S. crude oil production has also put pressure on oil prices.

In March, U.S. crude output rose to 10.47 million barrels per day, the highest on record, according to a monthly report by the Energy Information Administration (EIA).

The number of rigs drilling in the United States was also up by two in the week to June 1, bringing the total to 861, the most since 2015, General Electric Co’s Baker Hughes energy services said on Friday.

Industry group American Petroleum Institute (API) is due to release its data for last week’s U.S. crude oil inventories at 2030 GMT on Tuesday, and the EIA report is scheduled at 1430 GMT on Wednesday.

U.S. crude stocks were forecast to fall about 2.5 million barrels on average in the week ended June 1, according to five analysts polled ahead of the reports.

Trump’s sanctions on Iran may be creating an oil trading boom — in China

CNBC

  • Trade in Chinese yuan-denominated crude oil futures has jumped since President Donald Trump pulled the U.S. out of the Iran nuclear deal.
  • There is speculation that restrictions on Iranian oil sales and the lack of access to dollar financing will spur demand for the Shanghai-listed derivatives.

A clerk counts stacks of Chinese yuan at a bank in Beijing, China.

Getty Images
A clerk counts stacks of Chinese yuan at a bank in Beijing, China.

Trade in Chinese yuan-denominated crude oil futures has surged since President Donald Trump pulled the U.S. out of the Iran nuclear deal.

Launched on March 26, crude oil futures on the Shanghai International Energy Exchange (INE) were met with fanfare — and skepticism about how much a state-managed marketplace could displace the well-established crude trade in the New York Mercantile Exchange’s West Texas Intermediate and the Intercontinental Exchange’s Brent futures.

“Beijing ‘s attempts to ‘internationalize’ the contract appear to have paid off.”-BMI Research

But Trump’s move to reimpose sanctions on Iran may have spurred interest in the Chinese oil futures. Last Wednesday, daily trade volumes in INE oil futures hit a record of over 240,000 lots, double what they were on Tuesday when news of the renewed sanctions broke.

“There has been speculation that restrictions on Iranian oil sales and the lack of access to dollar financing will boost demand for yuan-denominated Shanghai futures,” said BMI Research in a note on Monday. “With China deepening its energy ties with Iran and given Beijing’s desire both to support the contact and — relatedly — to further internationalize the use of its currency, payment in yuan and benchmarking against Shanghai futures would seem logical.”

Veteran oil trader John Driscoll told CNBC last week that Iranian traders have the option of trading in Chinese yuan-denominated crude oil futures on the Shanghai International Energy Exchange — circumventing any restrictions on dollar-denominated trade and U.S. banks.

Doubts about how long it will last

Even so, some industry watchers remain skeptical over the long-term impact Iran will have on the Chinese futures, as Iranian crude is not deliverable into the Shanghai oil contract.

Even so, interest in the Shanghai oil futures have surpassed expectations, with Chinese state-owned companies and foreign interests taking part in the trade.

At least one oil sales agreement has been signed with state-owned major Sinopec, Reuters reported.

“Concerns over heavy state dominance in the oil sector does not appear to be dampening participation in the contract, neither does its denomination in yuan and the added FX risks this brings,” said BMI, adding that the futures are gaining tracing.

“Beijing ‘s attempts to ‘internationalize’ the contract appear to have paid off,” it added.

Oil prices rise as Saudi Arabia says production curbs could last into 2019

CNBC

  • Oil prices rose, pushed up by Saudi statements that OPEC and Russian led production curbs will need to be extended into 2019 in order to tighten the market.
  • The rise in oil prices defied global stock markets and other commodities, which slumped on worries about a trade stand-off between the U.S. and China.

An oil pump jack in Gonzales, Texas.

Getty Images
An oil pump jack in Gonzales, Texas.

Oil prices rose on Friday, pushed up by Saudi statements that OPEC and Russian led production curbs that were introduced in 2017 will need to be extended into 2019 in order to tighten the market.

The rise in oil prices defied global stock markets and other commodities, which slumped on the back of worries about a trade stand-off between the United States and China.

U.S. President Donald Trump signed a presidential memorandum on Thursday that could impose tariffs on up to $60 billion of imports from China, while China unveiled plans on Friday to impose tariffs on up to $3 billion of U.S. imports.

U.S. West Texas Intermediate (WTI) crude futures were at $65.09 a barrel at 0045 GMT, up 79 cents, or 1.2 percent, from their previous close.

Brent crude futures were at $69.64 per barrel, up 73 cents, or 1.1 percent.

Traders said the driver for crude futures was a statement by Saudi Arabian Energy Minister Khalid al-Falih, who said on Thursday that OPEC members will need to continue coordinating with Russia and other non-OPEC oil-producing countries on supply curbs in 2019 to reduce global oil inventories.

The Organization of the Petroleum Exporting Countries (OPEC), of which Saudi Arabia is the de-facto leader, as well as a group of non-OPEC countries led by Russia, struck a production supply agreement in January 2017 to remove 1.8 million barrels per day (bpd) from global markets and end a supply glut.

The pact is set to expire at the end of this year, but Saudi Arabia now seems to be pushing for an extension.

“We know for sure that we still have some time to go before we bring inventories down to the level we consider normal and we will identify that by mid-year when we meet in Vienna,” Falih told Reuters in an interview in Washington.

“And then we will hopefully by year-end identify the mechanism by which we will work in 2019.”

Although analysts said the potential stand-off between the United States and China could also hit oil markets, for now most said demand looked healthy. Morgan Stanley also cited a pick-up in seasonal demand in the coming month and geopolitical risk as potential supports for oil prices,

“We are only 3-4 weeks away from peak refinery maintenance, after which crude and product demand should accelerate … Global inventories are already at the bottom end of the five-year range. With the inventory cushion largely gone, oil prices will likely be more sensitive to geopolitical risk factors,” the U.S. bank said.

“There are sufficient reasons to expect oil prices to strengthen further from here, and we stick with our (Brent) $75 per barrel call for Q3,” Morgan Stanley said.

Oil prices rise on surprise U.S. crude inventory draw

REUTERS

* Brent crude oil futures near $70 per barrel

* Ongoing OPEC-led supply restraint has been supporting oil

* Weak dollar also supports oil prices

* Soaring U.S. production tempers bullish mood somewhat

By Henning Gloystein

SINGAPORE, March 22 (Reuters) – Oil prices rose on Thursday, lifted by a surprise draw on U.S. crude inventories as well as ongoing dollar weakness which makes oil cheaper in global markets and potentially spurs demand.

U.S. West Texas Intermediate (WTI) crude futures were at $65.39 a barrel at 0021 GMT, up 22 cents, or 0.3 percent, from their previous close.

Brent crude futures were at $69.65 per barrel, up 18 cents, or 0.3 percent.

Both benchmarks are hovering just below their highest levels since early February, having risen around 10 percent from March lows.

Some support for crude futures came from currency markets, where the dollar fell as Federal Reserve officials stuck to their view of three rate increases for 2018, even as they delivered an expected quarter point rate hike.

In oil markets, U.S. crude inventories C-STK-T-EIA fell 2.6 million barrels in the week to March 16, to 428.31 million barrels, the Energy Information Administration (EIA) said late on Wednesday.

“Oil … had a big session overnight although this wasn’t just a function of the interest rate move. Inventory data for last week showed a surprise crude draw as well as significant drawdowns in both gasoline and distillates inventories,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

Further supporting oil prices has been supply restraint led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia, which started in 2017 and is scheduled to go on for the rest of 2018.

The overall bullish mood is being somewhat tempered by U.S. crude production C-OUT-T-EIA, which climbed to a fresh record of 10.4 million barrels per day (bpd) last week, putting the United States ahead of top exporter Saudi Arabia and within reach of Russia’s 11 million bpd.

Reporting by Henning Gloystein; editing by Richard Pullin

Oil prices rise as US President Trump set to meet North Korea’s Kim

CNBC

  • Crude oil futures rose on Friday.
  • Asian stock markets gained on news that North Korean leader Kim Jong Un will meet with U.S. President Donald Trump.
  • Beside geopolitics, oil markets were mainly concerned with soaring output from the United States.

Oil jack pumps in the Kern River oil field in Bakersfield, California.

Jonathan Alcorn | Reuters
Oil jack pumps in the Kern River oil field in Bakersfield, California.

Crude oil futures rose on Friday as Asian stock markets gained on news that North Korean leader Kim Jong Un will meet with U.S. President Donald Trump.

The two will likely meet by May and Kim has pledged to refrain from further nuclear or missile tests, South Korea’s national security chief said late on Thursday after briefing White House officials on talks between Seoul and Pyongyang.

The White House said Trump would accept the invitation at a place and time to be determined.

The news lifted Asian stocks markets, and pulled crude oil futures along with them, traders said.

Brent crude futures were at $63.95 per barrel at 0102 GMT, up 34 cents, or 0.5 percent, from their previous close.

U.S. West Texas Intermediate (WTI) crude futures were at $60.39 a barrel, up 27 cents, or 0.45 percent. WTI also fell by more than 2 percent the previous session.

Beyond geopolitics, oil markets were mainly concerned with soaring output from the United States, which has risen by 23 percent since mid-2016, to 10.37 million barrels per day (bpd).

That’s more than top exporter Saudi Arabia produces. Only Russia pumps more, at almost 11 million bpd.

“It seems only a matter of time before the U.S. becomes the biggest oil producer in the world. The main question which keeps investors busy is when exactly this will be reached,” Hans van Cleef, senior energy economist at Dutch bank ABN Amro, said in a note to investors.

Crude oil falls, hits one week low

Crude oil falls, hits one week low  

Unlike Middle East producers, where output is largely dictated by state-owned oil companies, U.S. producers drill and sell purely based on economics. If prices remain at current levels or rise further, U.S. drillers are profitable and will raise output; if prices stumble, U.S. production will fall.

“The correlation between the U.S. oil production and the oil prices will remain considerable,” van Cleef said.

As much as on production, oil prices will depend on demand.

“Global demand will continue to grow by 1.5 million barrels per day in both 2018 and 2019. This would offer enough room for U.S. oil producers to increase production and for OPEC and her allies to minimalize the production cuts towards the end of 2019,” van Cleef said.

The Middle East-dominated Organization of the Petroleum Exporting Countries(OPEC) and Russia since 2017 have been leading an effort to withhold production to prop up prices.